One of the most stressful times of the year for a person or a business is undoubtedly the tax season. But if you tread carefully and keep a few things in mind while filing your taxes you need not worry much about it and can be free of all the worries that come along with it.
Before discussing things you should keep in mind to be well prepared for the tax season 2021, let’s understand what exactly a tax season is.
What is tax season?
Tax season is the time when individual taxpayers prepare financial statements and reports for the previous year and submit their tax returns.
In the US, this period is generally between January 1 and April 15. However, for 2022, the IRS has announced its season starting from January 24, 2022, when it will accept and process tax returns.
In the US, individuals typically must file their annual tax return by April 15 of the year following any reportable earnings. Tax returns submitted after tax season are subject to late penalty fees and interest charges.
Things to keep in mind-
- Start Early: Although while you read this article, the deadlines might be soon approaching, still to start early means creating a checklist for the documents that are to be filed with the returns and making sure all the book-keeping records are complete, and you have all your work and investment-related documents so that you don’t forget any of the essential documents and can avoid an unnecessary audit from the IRS.
- Take an account of what your tax owed/refund is: A person should estimate the tax to anticipate what they might anticipate when they submit the return to tackle the tax return season. By doing this, they can begin planning how they’ll pay their tax and what to do with the refund. A few calculators that could be used are TurboTax, TaxAct, etc.
- Do tax-loss harvesting: This means that if you have shares that you’re losing money on, sell those shares and capture losses to offset the income you made from elsewhere. This strategy helps reduce your tax burden, although there are limits to how much you can write off with this strategy.
- Invest in tax-advantaged accounts and donate to charity: Tax-advantaged funds mean investing your money in accounts with tax benefits like Health Savings Accounts or Retirement Accounts. This will help reduce your tax burden along with doing charity for your tax season 2021. You get a special deduction in tax for doing charity of a specific amount but make sure you have the receipt or proof for the same.
Does this make you all worked up?
A smarter approach to avoid the hassle of new tax laws for 2021 filing season is outsourcing your filings to an expert accounting professional, which alongside saving time will also help you in avoiding miss-outs on any important documents or filling in the wrong information. This is the most common mistake people make while filing taxes.
Mercurius Advisory Services provides you with top-notch taxation services and consists of a team of industry experts with years of experience in bookkeeping, filing of business, and individual taxes.
Book a free consultation to clarify your queries by visiting our website.